7. Given the following information for two companies, both of which have a 30% tax rate and a 100% payout ratio: ($ in m
Posted: Fri Jul 01, 2022 7:47 am
7. Given the following information for two companies, both ofwhich have a 30% tax rate and a 100% payout ratio:
($ in millions)
Company A
Company B
EBIT
$100
$100
Interest Expense
$20
$0
Total Assets
$1,000
$1,000
Calculate the following for eachcompany:
Assuming the risk associated with thedebt is small, which company do you think is more valuable andwhy?
($ in millions)
Company A
Company B
EBIT
$100
$100
Interest Expense
$20
$0
Total Assets
$1,000
$1,000
Calculate the following for eachcompany:
Assuming the risk associated with thedebt is small, which company do you think is more valuable andwhy?